|
on Business Economics |
| By: | Gian Luca Clementi; Thomas F. Cooley; Sonia B. Di Giannatale |
| Date: | 2010–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:661465000000000149&r=bec |
| By: | David E. Allen (School of Accounting, Finance and Economics,); Michael McAleer (Econometric Institute,); Marcel Scharth (VU University Amsterdam) |
| Abstract: | In this paper we document that realized variation measures constructed from high-frequency returns reveal a large degree of volatility risk in stock and index returns, where we characterize volatility risk by the extent to which forecasting errors in realized volatility are substantive. Even though returns standardized by ex post quadratic variation measures are nearly gaussian, this unpredictability brings considerably more uncertainty to the empirically relevant ex ante distribution of returns. Carefully modeling this volatility risk is fundamental. We propose a dually asymmetric realized volatility (DARV) model, which incorporates the important fact that realized volatility series are systematically more volatile in high volatility periods. Returns in this framework display time varying volatility, skewness and kurtosis. We provide a detailed account of the empirical advantages of the model using data on the S&P 500 index and eight other indexes and stocks. |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf197&r=bec |
| By: | Giammario Impullitti; Omar Licandro |
| Abstract: | The availability of rich firm-level data sets has recently led researchers to uncover new evidence on the effects of trade liberalization. First, trade openness forces the least productive firms to exit the market. Secondly, it induces surviving firms to increase their innovation efforts and thirdly, it increases the degree of product market competition. In this paper we propose a model aimed at providing a coherent interpretation of these findings. We introducing firm heterogeneity into an innovation-driven growth model, where incumbent firms operating in oligopolistic industries perform cost-reducing innovations. In this framework, trade liberalization leads to higher product market competition, lower markups and higher quantity produced. These changes in markups and quantities, in turn, promote innovation and productivity growth through a direct competition effect, based on the increase in the size of the market, and a selection effect, produced by the reallocation of resources towards more productive firms. Calibrated to match US aggregate and firm-level statistics, the model predicts that a 10 percent reduction in variable trade costs reduces markups by 1:15 percent, firm surviving probabilities by 1 percent, and induces an increase in productivity growth of about 13 percent. More than 90 percent of the trade-induced growth increase can be attributed to the selection effect. |
| Keywords: | International Trade, Trade Liberalization, Heterogeneous Firms, Endogenous Market Structure, Productivity Growth, Endogenous Growth. |
| JEL: | F12 F13 O31 O41 |
| Date: | 2010–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:aub:autbar:841.10&r=bec |
| By: | Brown, Alessio J. G.; Merkl, Christian; Snower, Dennis J. |
| Abstract: | This paper examines the labour market matching process by distinguishing its two component stages: the contact stage, in which job searchers make contact with employers and the selection stage, in which they decide whether to match. We construct a theoretical model explaining two-sided selection through microeconomic incentives. Firms face adjustment costs in responding to heterogeneous variations in the characteristics of workers and jobs. Matches and separations are described through firms' job offer and firing decisions and workers' job acceptance and quit decisions. Our calibrated model for the U.S. can account for important empirical regularities that the conventional matching model cannot. |
| Keywords: | Matching; incentives; adjustment costs; unemployment; employment; quits; firing; job offers; job acceptance; |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ner:ifwkie:info:hdl:10419/37391&r=bec |
| By: | Berger, Allen N.; Bouwman, Christa H. S.; Kick, Thomas; Schaeck, Klaus |
| Abstract: | Liquidity creation is one of banks' raisons d'être. But what happens to liquidity creation and risk taking when a bank is identified as distressed by regulatory bodies and subjected to regulatory interventions and/or receives capital injections? What are the long-run effects of such interventions? To address these questions, we exploit a unique dataset of German universal banks for the period 1999 - 2008. Our main findings are as follows. First, regulatory interventions and capital injections are followed by lower levels of liquidity creation. The probability of a decline in liquidity creation increases to up to around 50 percent when such actions are taken. Second, bank risk taking decreases in the aftermath of regulatory interventions and capital injections. Third, while banks' liquidity creation market shares decline over the five years following such disciplinary measures, they also reduce their risk exposure over this period to become safer banks. -- |
| Keywords: | Liquidity creation,bank distress,regulatory interventions,capital injections |
| JEL: | G21 G28 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp2:201005&r=bec |
| By: | d'Albis, Hippolyte; Augeraud-Véron, Emmanuelle; Venditti, Alain |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:ler:wpaper:10.13.319&r=bec |
| By: | Crespo Cuaresma , Jesus (Department of Economics, Vienna University of Economics and Business); Fernandez Amador, Octavio (Department of Economics, University of Innsbruck) |
| Abstract: | We analyse the dynamics of the standard deviation of demand shocks and of the demand component of GDP across countries in the European Monetary Union (EMU). This analysis allows us to evaluate the patterns of cyclical comovement in EMU and put them in contrast to the cyclical performance of the new members of the EU and other OECD countries. We use the methodology put forward in Crespo-Cuaresma and Fernandez-Amador (2010), which makes use of sigma-convergence methods to identify synchronization patterns in business cycles. The Eurozone has converged to a stable lower level of dispersion across business cycles during the end of the 80s and the beginning of the 90s. The new EU members have also experienced a strong pattern of convergence from 1998 to 2005, when a strong divergence trend appears. An enlargement of the EMU to 22 members would not decrease its optimality as a currency area. There is evidence for some European idiosyncrasy as opposed to a world-wide comovement. |
| Keywords: | Business cycle synchronization; structural VAR; demand shocks; European Monetary Union |
| JEL: | E32 E63 F02 |
| Date: | 2010–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:ris:sbgwpe:2010_013&r=bec |
| By: | Bernardo da Veiga (School of Economics and Finance,); Felix Chan (School of Economics and Finance,); Michael McAleer (Econometric Institute, Erasmus School) |
| Abstract: | The internal models amendment to the Basel Accord allows banks to use internal models to forecast Value-at-Risk (VaR) thresholds, which are used to calculate the required capital that banks must hold in reserve as a protection against negative changes in the value of their trading portfolios. As capital reserves lead to an opportunity cost to banks, it is likely that banks could be tempted to use models that underpredict risk, and hence lead to low capital charges. In order to avoid this problem the Basel Accord introduced a backtesting procedure, whereby banks using models that led to excessive violations are penalised through higher capital charges. This paper investigates the performance of five popular volatility models that can be used to forecast VaR thresholds under a variety of distributional assumptions. The results suggest that, within the current constraints and the penalty structure of the Basel Accord, the lowest capital charges arise when using models that lead to excessive violations, thereby suggesting the current penalty structure is not severe enough to control risk management. In addition, an alternative penalty structure is suggested to be more effective in aligning the interests of banks and regulators. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf186&r=bec |
| By: | Uluc Aysun (University of Connecticut, Department of Economics); Ralf Hepp (Fordham University, Department of Economics) |
| Abstract: | This paper shows that the balance sheet channel of monetary transmission works mainly through U.S. bank holding companies that securitize their assets. This finding is different, in spirit, from the widely-found negative relationship between financial development and the strength of the lending channel of monetary transmission. Focusing on the balance sheet channel, and using bank-level observations, we find that securitized banks are more sensitive to borrowers’ balance sheets and that monetary policy has a greater impact on this sensitivity for securitizing bank holding companies. The optimality conditions from a simple partial equilibrium framework suggest that the positive effects of securitization on policy effectiveness could be due to the high sensitivity of security prices to policy rates. |
| Keywords: | balance sheet channel, banks, bank holding companies, securitization. |
| JEL: | E44 F31 F41 O16 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:frd:wpaper:dp2010-05&r=bec |
| By: | Rupayan Pal; Bibhas Saha |
| Abstract: | Whether the outcome of bargaining over wage and employment between an incumbent firm and a union remains efficient under entry threat is examined. The workers\' reservation wage is not known to the entrant, and entry is profitable only against the high reservation wage. The entrant observes the pre-entry price, but not necessarily the wage agreements. When wage is not observed, contracts feature over-employment. Under separating equilibrium the low type is over-employed, and under pooling equilibrium the high type is over-employed. But when wage is observed, pooling equilibrium may not always exist, and separating equilibrium does not involve any inefficiency. [Working Paper No. 2010-016]. |
| Keywords: | firm, employment, Efficient Bargaining, Entry Threat, Signalling, Inefficiency, wage, employed, equilibrium, inefficiencey, contracts, price, enttrant, reservation, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2833&r=bec |
| By: | Atanas Hristov |
| Abstract: | This paper studies the interaction of financing constraints and labor market imperfections on the labor market and economic activity. My analysis builds on the agency cost framework of Carlstrom and Fuerst [1998. Agency costs and business cycles. Economic Theory, 12(3):583-597]. The aim of this article is to show that financing constraints can substantially amplify and propagate total factor productivity shocks in cyclical labor market dynamics. I find that under the Nash bargaining solution financing constraints increase substantially the volatility of wages, and in turn, amplification for the labor variables falls short of the observed volatilities in the data. Atop of this, the comovement between output and labor share is counterfactual. However, there is substantial scope for any type of wage rigidity and financing constraints to reinforce each other, and to generate the observed volatilities in the labor market, moreover, to produce a wide range of comovements between output and labor share. |
| Keywords: | Credit and search frictions, Labor market, Unemployment |
| JEL: | E24 E32 J64 G24 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2010-044&r=bec |
| By: | Ryoko Oki (Graduate School of Economics, University of Tokyo); Noriyuki Yanagawa (Faculty of Economics, University of Tokyo) |
| Abstract: | This paper examines the effects of exclusive dealing contracts offered by an incumbent distributor. The effectiveness of exclusive dealing contracts offered by distributors is quite differrent from those offered by incumbent manufacturers. The traditional literature has focused solely on exclusive dealing contracts made by incumbent manufacturers and has derived multiple equilibria within homogeneous price competition models. In contrast, this paper asserts that exclusive dealing contracts made by a distributor generate a unique equilibrium and that an efficient entrant must be excluded under the equilibrium as long as distributors have sufficient bargaining power. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf222&r=bec |
| By: | KAWAKAMI Atsushi; MIYAGAWA Tsutomu |
| Abstract: | Following Bernard, Redding and Schott (2010), we have constructed product and firm level data on Japanese manufacturing firms using the Census of Manufactures. Employing this data, we have found that multiple-product firms show better performance than single-product firms and product switching behavior in incumbent firms leads to greater output growth in the Japanese manufacturing sector, more so than in entry and exit. Empirical studies at industry level show that an unregulated, competitive environment stimulates product switching. At firm level, labor productivity growth and an unregulated, competitive environment encourage product switching behavior. Such product switching behavior improves firm performance in the areas of output, employment and labor productivity, etc. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:10043&r=bec |
| By: | Oxelheim, Lars (Research Institute of Industrial Economics (IFN)); Wihlborg, Clas (Argyros School of Business); Thorsheim, Marcus (Lund Institute of Economic Research) |
| Abstract: | In this chapter we examine the role of the CFO in setting risk management strategy with respect to macroeconomic risk, in particular, and we consider the information requirements for setting a strategy that is consistent with corporate objectives. We argue that macroeconomic risk management requires a broad approach encompassing financial, operational and strategic considerations. Furthermore, several interdependent sources of risk in the macroeconomic environment must be taken into account. Once this interdependence among, for example, exchange rates, interest rates and inflation are taken into account macroeconomic risk management can be considered a relatively self-contained aspect of Integrated Risk Management (IRM) provided relevant information is available to management. Financial risk management cannot be considered a self-contained part of macroeconomic risk management, however, since value increasing investments in flexibility of business operations affect corporate exposure and make it uncertain. |
| Keywords: | Risk Management Strategy; Macroeconomic Risk; Integrated Risk Management; Chief Financial Officer; Information Needs; Corporate Strategy; Financial Risk; Real Options |
| JEL: | F23 G32 G34 M21 |
| Date: | 2010–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0847&r=bec |
| By: | Shin-ichi Fukuda (Faculty of Economics, University of Tokyo); Jun-ichi Nakamura (Development Bank of Japan) |
| Abstract: | The Japanese economy experienced prolonged recessions during the 1990s. Previous studies suggest that evergreen lending to troubled firms known as ?zombie firms? distorted market discipline in terms of stabilizing the Japanese economy and caused significant delays in the economy?s recovery. However, the eventual bankruptcy of zombies was rare. In fact, a majority of the ?zombie? firms substantially recovered during the first half of the 2000s. The purpose of this paper is to investigate why zombie firms recovered in Japan. We first extend the method of Caballero, Hoshi, and Kashyap (2008) and identify zombies from among the listed firms. Subsequently, we investigate the nature of corporate restructuring that was effective in reviving zombie firms. Our multinomial logistic regressions suggest that reducing the employee strength of zombie firms and selling its fixed assets were beneficial in facilitating their recovery. However, corporate restructuring without accounting transparency or by discouraging incentives for managers was ineffective. In addition, corporate restructuring lacked effectiveness in the absence of favorable macroeconomic environment as well as substantial external financial support. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf224&r=bec |
| By: | Booth, Alison L. (University of Essex); Katic, Pamela (Australian National University) |
| Abstract: | In this paper we estimate the elasticity of the labour supply to a firm, using data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. Estimation of this elasticity is of particular interest not only in its own right but also because of its relevance to the debate about the competitiveness of labour markets. The essence of monopsonistically competitive labour markets is that labour supply to a firm is imperfectly elastic with respect to the wage rate. The intuition is that, where workers have heterogeneous preferences or face mobility costs, firms can offer lower wages without immediately losing their workforce. This is in contrast to the perfectly competitive extreme, in which the elasticity is infinite. Therefore a simple test of whether labour markets are perfectly or imperfectly competitive involves estimating the elasticity of the labour supply to a firm. We find that the Australian wage elasticity of labour supply to a firm is around 0.71, only slightly smaller than the figure of 0.75 reported by Manning (2003) for the UK. These estimates are so far from the perfectly competitive assumption of an infinite elasticity that it would be difficult to make a case that labour markets are perfectly competitive. |
| Keywords: | monopsony, imperfect competition, separation, labour supply elasticity |
| JEL: | J42 J21 J71 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5167&r=bec |
| By: | Stephen Eliot Hansen |
| Abstract: | In most firms, managers periodically assess workers' performance. Evidence suggests that managers withhold information during these reviews, and some observers argue that this necessarily reduces surplus. This paper assesses the validity of this argument when workers have career concerns. Disclosure has two effects: it exposes the worker to uncertainty about future effort levels, but allows him to use current effort to influence his employer's beliefs about future effort. The surplus-maximizing disclosure policy reveals output realizations in the center of the distribution, but not in the tails. Thus, it is efficient for firms to reveal some but not all performance information. |
| Keywords: | Performance Appraisal, Career Concerns, Incentives, Risk. |
| JEL: | D82 D86 L20 M12 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1232&r=bec |
| By: | Börje, Johansson (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Hans, Lööf (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology) |
| Abstract: | There are systematic long-run differences in the performance of firms explained by the R&D-strategy that each firm employs. Controlling for unobservable heterogeneity, past performance and other firm characteristics, this paper shows that labour productivity is, on average, 13 percent higher among firms with persistent R&D commitment and 9 percent higher among firms which make occasional R&D efforts when compared with non-R&D-firms. Furthermore, firms which employ a strategy with persistent R&D efforts are rewarded with a productivity growth rate that on average is about 2 percent higher than for other firms. The results are similar when firm performance is measured as total sales or exports per labor input. |
| Keywords: | R&D; Innovation-strategy; productivity; export; dynamic panel-data |
| JEL: | C23 O31 O32 |
| Date: | 2010–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0240&r=bec |
| By: | Chongwoo Choe; In-Uck Park |
| Abstract: | In a typical corporate hierarchy, the manager is delegated the authority to make strategic decisions, and to contract with other employees. By studying a model with one principal and two agents where one agent can gather information that is valuable for the principal's project choice and the other agent provides effort to the chosen project, we study when the principal can benefit from such delegation relative to centralization. We show that beneficial delegation is possible when complete contracts cannot be written, and delegation of authority should necessarily be to the information gatherer. The benefits of delegation stem from either efficiency gains or reduction in rent to the information gatherer. |
| Keywords: | Corporate hierarchies, information gathering, delegation, centralization |
| JEL: | C72 D21 D82 L22 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2010-03&r=bec |
| By: | Alberto Behar |
| Abstract: | This paper constructs country-level aggregates of trade facilitation measures from firm-level responses in the Enterprise Surveys and compares them with the Doing Business indicators, the Logistics Performance Index and the Enabling Trade Index. Correlations between the data sources are low even for very specific and similar questions. We also use the Enterprise Surveys to distinguish between within-country inter-firm variation and between-country variation, finding that the latter accounts for only a quarter of the total. For the purposes of identifying where reform is needed and estimating the relationship between trade facilitation and exports, these findings raise the issue of which form of variation is more informative and which data source is more reliable. |
| Keywords: | Trade facilitation, Enterprise Surveys, Logistics Performance Index, Doing Business, Enabling Trade Index, Gravity models, Firm heterogeneity |
| JEL: | F1 N70 O24 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:503&r=bec |
| By: | Matsuura, Toshiyuki; Tanaka, Kiyoyasu; Urata, Shujiro |
| Abstract: | This study employs confidential affiliate-level panel data to improve measures of foreign affiliate activities of Japanese firms in manufacturing sectors. Combining existing data on U.S. MNCs with the Japanese data, we illustrate the pattern and determinant of their foreign affiliate sales by destination market across countries and industries for the period 1989-2005. Among our results, Japanese and U.S. MNCs are similar in the substantial growth of their foreign affiliate sales and the importance of sales to local markets. However, Japanese MNCs are distinctive from U.S. MNCs in that Japanese affiliate sales in Asia were prominently higher in host markets with lower educational attainment. |
| Keywords: | Japan, United States, International business enterprises, Industrial management, Multinational firm, FDI, U.S., Skill endowment |
| JEL: | F21 F23 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper234&r=bec |
| By: | Franco Mariuzzo (Geary Institute, University College Dublin, Ireland); Xiaoheng Zhang (Economic and Social Research Institute, Dublin, Ireland) |
| Abstract: | We generalize the growth-of-firm literature by linking alternative metrics of size via a Copula approach. We look at the result of the fitted Copula and justify the metric we base our analysis upon. We employ the Amadeus dataset and investigate the growth dynamics of the European pharmaceutical industry in the Single Market Programme era, 1990–2004. Relying on a set of dynamic panel Probit methods that deal with unobserved heterogeneity and initial conditions, we analyze how our units of investigation, multinationals, capture opportunities over time. We find strong evidence of state dependence and mean reversion, as predicated by the theory of maturation — firms face a period of rapid growth, followed by a slow down, or even a stop, in growth. We finish off our exercise by conditioning the fitted Copula on the predicted measure of size and simulate the remaining measures. |
| Keywords: | Copula, Dynamic Nonlinear Panel Data Models, Entry, Firms Growth, Lower Bound, Pharmaceutical Industry, Single Market Programme, Unobserved Heterogeneity |
| JEL: | C10 C11 C23 L11 L65 |
| Date: | 2010–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:ucd:wpaper:201037&r=bec |